Four ways retailers are offsetting the £1m per 1000 employee NIC tax hike

When you see the cold, hard numbers written down, the reality sinks in.

• The employer NIC rate has risen from 13.8% to 15% 
• The threshold for employer contributions has dropped from £9,100 to £5,000 
• The Employer Allowance has increased from £5,000 to £10,500—a help for smaller firms, but a drop in the ocean for large-scale retail 

A recent BBC article dug into the tangible impact this is already having on retailers up and down the country, as well as how they’re dealing with it. Given that these changes are likely to stay for the long term, it's worth taking a look at your strategy and seeing if it can give you the sustainability you need.

Based on what the retailers interviewed in the BBC article discussed, I’ve put together these possible strategies that you could consider.

Fewer contracts, more hours

This approach helps reduce the NIC cost per hour worked by consolidating more hours into fewer contracts. It also improves scheduling consistency and opens the door for cross-training. But there are risks. Renegotiating contracts reduces employee flexibility and could require formal restructuring or redundancy planning.

Many great retail employees actively choose the industry because of its flexibility, whether they’re caring for dependents, still in education, or have any number of other commitments. Taking that flexibility away can lead to talent moving to your competitors.

It’s also important to look into your legal obligations while you’re adjusting contracts. In addition to new labour laws coming into force, you have several responsibilities as an employer that you need to look into to ensure you’re treating everyone fairly. That’ll protect you, your employees and your reputation.

• This might work for you if: you want a more traditional workforce and you have employees who would welcome additional hours.
• You should avoid this if: a large amount of your workforce relies on flexibility and you can’t afford the losses.

Cutting vacancies and hours

Some companies are relying on natural attrition. Every employee will eventually leave a company, often for completely mundane reasons. Examples include: retiring, moving to a new home or looking into a new career.  As a rule, this is less of a shock to the system compared to outright redundancies and should be factored into your recruitment costs anyway.

To capitalise on this and save money, you wait for employees to leave of their own initiative, and then do not look to fill that role again.

It’s a clean way to reduce costs without the noise of formal restructuring. But this move isn't without consequences. Reducing headcount too quickly can lead to overwork, burnout, and service-level decline, especially if demand holds steady while labour shrinks. The true cost might be felt in customer experience or store performance. 

• This might work for you if: you have a clear picture of your recruitment costs, and don’t need to save money in a hurry.
• You should avoid this if: you need a quick fix and don’t have time to wait for people to leave organically.

Increasing automation

For some retailers, automation is becoming a more practical option. From self-service checkouts to robotic warehouse systems, there are plenty of potential automation solutions for retailers to use.

When done right, automation enables long-term cost control, boosts accuracy, and removes manual admin. But it demands upfront investment, and the benefits only materialise with the right change support and team buy-in. For smaller or cash-constrained retailers, that can feel out of reach. 

• This might work for you if: you have some capital saved up for investment in new technologies.
• You should avoid this if: you’ll struggle to get buy-in from the team, or you don’t have many areas where automation will make a real impact.

Raising prices

Most retailers are having to look at price increases, but often on a smaller, incremental scale. This strategy requires a large price increase all at once.

It’s a fast way to protect margins and avoids making tough choices on existing roles. This is a high-risk play. It protects you from potentially losing your best talent, which is crucial in a business that relies heavily on employees with good product knowledge.

The economic climate right now could be described as ‘cautious’ at best. Consumers don’t want to spend a lot of money, and when they do, they want to be certain they’re getting maximum value. The last thing you want to do is price yourself out of the market, so look closely at what your competitors are doing.

• This might work for you if: you have a loyal customer base, a strong brand, and you haven’t raised prices too much recently.
• You should avoid this if: your brand is known for affordable products and for appealing to people on tighter budgets, or you’ve put prices up recently.

Futureproofing the retail workforce

The odds are good that most retailers are going to need a mixture of all the strategies I’ve just outlined. Exactly what will work varies hugely based on the situation you’re currently in and what you want the next year to look like. In short, you might need a complete systemic rethink.

You can’t just rely on part-time contracts to drive flexibility. If you need a new edge on your competitors, that will only come from capability.

Instead, look into investing in multi-skilled employees who can flex across functions, and use data to align workforce plans with real-time trading conditions. Automate what you can, but keep the human touch where it matters for your customers.

If you’d like a deeper dive into how you can refine your 2025 workforce strategy, our latest guide is built with retailers who want to cut costs without cutting corners and losing customers in mind.

It covers:

• How you could save as much as £9.6 million per year with a retail-specific retention strategy
• Tried and tested strategies to give your operations the edge they need, letting you focus on high-value activities
• Finding complete peace of mind as you effortlessly avoid costly legal penalties